By Paulina Duran
SYDNEY (Reuters) – National Australia Bank announced Monday that it is being investigated for alleged serious and ongoing violations of anti-money laundering and counter-terrorism laws, raising concerns about possible fines and higher compliance costs.
The Financial Crime Inspectorate said there were “areas of serious concern” that needed further investigation, but they were not considering a civil penalty warrant at the moment.
Stocks of Australia’s third largest lender fell 2.6% in morning trading, while the broader market changed little.
The Australian Transaction Reports and Analysis Center (AUSTRAC) said the issues at NAB concerned “potentially serious and persistent non-compliance” with customer identification procedures, customer due diligence and other compliance requirements.
“AUSTRAC’s concerns are based on historical and contemporary compliance assessments,” the agency said in a letter to the lender dated June 4.
“Particularly worrying is the severity of the self-reported matters that were presented to AUSTRAC over a longer period, combined with the associated completion rates.”
The agency announced that the investigation would now be carried out by the AUSTRAC enforcement team. She has not yet made a decision on whether further enforcement measures will be taken and is not currently considering civil proceedings.
This “reflects the previous work of the NAB”, but the position of the regulator could change, the letter added.
The NAB said it would continue to work with the regulator.
“NAB plays an important role in monitoring and reporting suspicious activity and the security of the Australian financial system, our bank and our customers,” said Chief Executive Officer Ross McEwan in a statement.
“We are very aware that we need to continue to improve our performance on these matters. We have worked to improve and clearly have more to do.”
The story goes on
AUSTRAC has fined A $ 2 billion (US $ 1.5 billion) in fines since 2018 on NAB’s larger competitors – Commonwealth Bank and Westpac Banking Corp – for violating money laundering regulations.
The escalation of the AUSTRAC investigation could have significant ramifications for NAB, including higher compliance costs, analysts at JPMorgan said in a press release.
Credit Suisse analysts issued a statement to their clients that the market would likely “dismiss” the regulator’s statement that it was not considering fines.
“In our view, the risk is not so much in the issues highlighted, but in the potential for formal investigation to uncover additional issues that we have seen in other cases,” they wrote.
($ 1 = 1.2925 Australian dollars)
(Reporting by Paulina Duran in Sydney and Rashmi Ashok in Bengaluru; editing by Diane Craft and Stephen Coates)
